Genesis Energy Capital Plan Report

Running head: Managing Finance 1

Managing Finance 4

Managing Finance

Cost of capital can be explained as an opportunity cost that is put in place to make investments in a specific way. The cost of capital can be obtained through the debt and equity a company acquired during the period of operations. The decisions in a company will be because of the new operations that may exceed the cost of capital through investments. To get the cost on debt the below formula may be used (Interest Expense x (1 – Tax Rate)/(Amount of Debt – Debt Acquisition Fees + Premium on Debt – Discount on Debt) while the formula for preferred stock is interest expense/ Amount of Preferred Stock. Based on the formula the preferred stock may be obtained in the following manner; Risk-Free Return + (Beta x (Average Stock Return – Risk-Free Return)).Higher returns are the main driving force in the market in situation of availability of risks (Kramer, 2015). Calculating the difference in cost and risk will involve numerous entities before obtaining the correct answer. The details of all the operations must be noted before coming up with a defined conclusion on what ought to be put in place.

Cost and risks from external forces will be essential in that it ensure maximum yields from the business in place. The firm is able to come up with modalities that will be used in curbing channels that will results to loss making. In addition, it is easy to protect the performance of the business by knowing the cost and risk involved in its operations.

Rapid growth in a business is important at all the time. The progress is shown thus giving the investor opportunities to search for more capital thus increasing the return. With rapid growth, it means that the business is able to attract more opportunities from the outside world thus making higher net sales. In addition, proper channels will be followed with the best way of realizing the investments plans for the business. Through such measures, more products can be brought to the market (Chen, 2007).

Yes, there would be a more efficient way of funding a growing company. Increasing the capital supply in a growing organization can be a way intensifying the operations. Frequent existence of capital in the organization will mean that all the required commodities will be purchased. In addition, such measures will increase the level at which priorities are highlighted and achieved.

References

Chen, J. (2007). Cost of Capital . Rapid Business Growth , 90-96.

Kramer, J. (2015, October 21). Building the Business Case. Retrieved October 22, 2015, from Cost of Capital, Cost of Borrowing, and Similar "Cost of" Terms Explained: https://www.business-case-analysis.com/cost-of-capital.html